MARKET CLOSE: NZ shares rally on A2 forecast; Fletcher, Tegel climb from lows

New Zealand shares rose, joining a global rally, with A2 Milk up after raising its full-year revenue guidance, Fletcher Building and Tegel Group climbing from their recent lows and Spark rising on demand for its attractive yield.

The S&P/NZX 50 Index gained 112.2 points, or 1.6 percent, to 7335.14. Within the index, 33 stocks gained, 14 fell and three were unchanged. Turnover was $272 million, including $122 million in Spark shares. 

Shares rose on Wall Street, with the Nasdaq Composite Index reaching a record high, and key equity benchmarks rose across Asia today as investors responded to what's seen as a market-friendly presidential election outcome in France and US President Donald Trump's imminent announcement on corporate tax cuts.

"There's a risk-on feel to it," said Greg Smith, head of research at Fat Prophets in Auckland. 

A2 led the index higher, rising 7.8 percent to a record $3.45 after the milk marketer forecast revenue of $525 million in the year ending June 30, up from $352.8 million a year earlier. A2 generated sales of $388 million in the nine months ended March 31, with third-quarter sales of its infant formula, popular in China where rules have been tightened for internet sales, exceeding expectations. 

"The changes we saw in China - it's all about rationing the number of brands available and improving the quality," Smith said. "A2 shouldn't be too scared if they are one of the brands."

Fletcher gained 3.8 percent to $8.31, having sunk to a 12-month low last week on the back of an earnings downgrade. Tegel, whose shares have been punished in the face of a glut of product and rivalry from Australia's Ingham's, gained 2.6 percent to $1.17.

"In New Zealand, we've seen some of the laggards rising on a bit of bargain hunting, rightly or wrongly," Smith said. "If you think we've seen a cyclical peak of the construction cycle you would not be jumping in and we certainly do." Tegel and Inghams are facing pricing pressure in the face of the glut and in a lot of supermarket chains overseas chicken is used as a loss leader. "Just because it has fallen doesn't necessarily make it cheap," he said.

Spark rose 1.8 percent to $3.675 and Smith said it may be a beneficiary of Australian investors deeming that market as becoming overcrowded with telcos and being drawn to its yield of over 6 percent. It has also benefitted from the regulator nixing Sky Network Television's proposed tie-up with Vodafone New Zealand.

Sky TV fell 0.3 percent to $3.83 today.

Among other stocks, Ebos Group rose 4.7 percent to $18.90. Auckland International Airport rose 2.4 percent to $6.84 after figures showed net inbound migration remains at record levels while short-term visitor arrivals chalked up another annual record, although there was a dip in March from the same month last year.

Australia & New Zealand Banking Group gained 2.6 percent to $35.12 and Westpac Banking Corp rose 1.9 percent to $37.77.

Fisher & Paykel Healthcare rose 2.3 percent to $9.82, Summerset Group gained 2 percent to $5.29 and Xero rose 1.8 percent to $20.85.

(BusinessDesk)